(ÒTHE DSMEG REGULATIONSÓ), REGS.3, 4 AND 7(1): HMRC
NOTICE 197, S.71.1 AND S.71.2
Summary
HMRC Commissioners were justified in raising an excise point assessment for
£26,790 against the carrier, R A International Ltd, (as the named guarantor) of
excise goods, where the carrier had been unable to provide the Accompanying
Administrative Document ("AAD") as proof of the transfer of the excise
goods between bonded warehouses in England and France.

The Commissioners had jurisdiction under DSMEG Regulation
3(1)(b) to raise the excise point since the irregularity (the lack of a
receipted copy AAD) had been detected within the UK by a UK Customs officer.

On the facts, HMRC Commissioners were not obliged to accept
alternative evidence that the excise goods had been delivered, in that the
requirements of Notice 197, sections 71.1 and 71.2 had not been complied with;
‘every reasonable effort’ had not been made to provide acceptable
alternative AAD proof of delivery and ‘exceptional circumstances’ did not
exist which would justify other forms of evidence to prove delivery. In
particular, the CMR document, which had been qualified on delivery as to ‘quality
and quantity’ and had inconsistent vehicle and trailer numbers, did not
evidence delivery of the excise goods for the purposes of UK duty.

Background
The decision appealed was that of the HM Revenue & Customs Commissioners
("the Commissioners"), taken on review, confirming an assessment to
excise duty in the sum of £26,790. The assessment was raised on 26 September
2005 and related to one single consignment of beer being carried under duty
suspension by R A International Ltd ("RAIL") from UK Excise Warehouse
Promptstock Ltd ("Promptstock") and to be delivered to EDW Marck
Excise Warehouse ("EDW") in France.

The provisions governing the movement were set out in rr.3,1
42 and 73 of the Excise Duty Points (Duty Suspended
Movements of Excise Goods) Regulations 2001 (SI 2001/3022) ('the DSMEG
Regulations').

Promptstock had, on their W1 warehousing return declared a
consignment of 1,920 cases of Special Brew beer being moved under cover of an
Accompanying Administrative Document ("AAD") reference 1071 to EDW.
The AAD should have been discharged by the return by EDW to Promptstock of a
certified copy. It came to the Commissioners’ attention that this had not
occurred, indicating that the excise goods appeared not to have been received by
EDW. The Commissioners duly wrote to Promptstock advising that it had failed to
discharge AAD 1071. In response Promptstock faxed the Commissioners a copy CMR
document. The CMR document referred to AAD 1071; described the goods being
carried as 1,920 cases of Special Brew and referred to the transporting vehicle
as registration number L898 NNW and the trailer as 106. It bore an EDW stamp and
carried the handwritten qualification "Sous r

éserve
de qualité et de quantité"
("Under reserve as to quality and quantity"). Promptstock also
provided the Commissioners with a copy of their copy of the AAD.

Four months after despatch, the AAD had still not been returned
and an excise duty point was created. RAIL’s name had been inserted in box 10
of the AAD as guarantor. In accordance with r.7, RAIL was to bear liability for
payment of the UK duty, so the Commissioners raised their assessment against
RAIL. RAIL applied to the Commissioners by letter for a departmental review
maintaining that the excise goods had been properly delivered as witnessed by
the CMR, duly stamped by EDW. The review was carried out and the assessment
upheld by the Commissioners, who relied strictly on rr.3, 4 and 7.

It was open to the Commissioners to accept alternative evidence
proving receipt of the excise goods under ss.71.1 and 71.2 of Notice 197
"Excise Goods Holding and Movement". Essentially, where reasonable
efforts had been made to obtain the original receipted AAD and it had not been
found, the Commissioners could accept a receipted copy or replacement AAD or a
letter from the importing country’s Customs officer confirming receipt of the
AAD goods by the consignee. In exceptional circumstances, where the consignor
could not provide one of these alternative forms of evidence, the Commissioners
could consider alternative evidence on a case-by-case basis. This required clear
alternative evidence establishing that: (1) the goods were received at the
consignee’s premises; (2) the goods were declared; and (3) the goods must have
been clearly identified as those shown on the original AAD.

The essence of the Commissioners’ submission was that the CMR
document merely identified a shipment of goods but not necessarily the
shipment of goods in question. This was unlike an AAD, which recorded
consignor/consignee excise numbers, the name of the guarantor and - once
receipted by the consignee - evidenced the delivery of the specific consignment
in question.

RAIL submitted that:
the Commissioners had no evidence that any irregularity occurred within
the UK;
the transaction was outside the jurisdiction of UK duty;
this was a perfectly normal transaction recorded properly in RAIL’s
books and with an audit trail showing its progress from start to finish;
the CMR should have been accepted by the Commissioners as alternative
evidence as it clearly showed delivery and receipt for the consignment.

JudgmentThe Jurisdiction Point
The tribunal pointed out "Regulation 3(1)(b)

1
specifically provides for the regulations to engage when the irregularity either
occurs within or is detected within the UK. The irregularity was quite clearly
discovered within the UK when [the UK Customs officer was] checking for the
discharge of the AAD." The transaction, therefore, clearly fell within the
scope of UK duty and the DSMEG Regulations.

The Notice 197 Point
The tribunal stated: "the very specific requirements set
out in section 71.1 and 71.2 of Notice 197 are not present. We are not at all
satisfied that [RAIL] ‘made every reasonable effort’ to obtain the original
receipted copy 3 and [RAIL] was unable to produce a receipted copy 2 or a
replacement copy 3." Therefore, 71.1 was not complied with.

Additionally, the tribunal did not consider the circumstances of
the case to be ‘very exceptional’ and therefore saw no reason for 71.2 to
apply. In any event "the alternative evidence acceptable under 71.2 ‘must
clearly identify the goods as those shown on the original AAD’." In the
tribunal’s view the CMR did not do that for a number of reasons: "the
description of the goods is certainly similar but the CMR is specifically
qualified to the effect that the load has not been checked as to quality or as
to quantity. Whoever stamped the CMR was not therefore guaranteeing the load. We
have no idea who stamped the CMR or whether it was a valid EDW stamp. The CMR
refers to vehicle 898 with trailer 106. We know from [RAIL’s] evidence that it
was not 898 which made the delivery and there is no firm evidence that 106 was
the trailer in question either. Clearly whoever stamped the CMR did not check
the registration number and the trailer number otherwise the discrepancy in
registration would have been noted. For all these reasons the decision of [the
Commissioners] that there was no acceptable alternative evidence was the only
reasonable decision which could have been reached."

The Complete Audit Trail Point
In the tribunal’s view the documents did not provide a
complete audit trail, in that they did not clearly specify the goods to which
the AAD referred.

Conclusions
The tribunal held that RAIL "has not discharged the burden
of proof and has not satisfied us on the balance of probability that the goods
were duly received by EDW." As a result, the assessment to excise duty had
been made correctly.

Comment
This case highlights the danger that exists for carriers of
excise goods between bonded warehouses with EC Member States. As the named
guarantor, the carrier is liable to pay the outstanding excise duty owed where
there is insufficient proof of delivery. It must be borne in mind that the
burden of proof (on the balance of probabilities) to establish proper delivery
of the excise goods in question is upon the carrier-guarantor. The carrier must
therefore ensure that the original AAD or one of its official copies or
replacements is available for inspection by Customs and maintain a comprehensive
audit paper trail as a backup, clearly establishing that the excise goods
collected were the same ones transported and delivered to their intended
destination.

Footnotes:

1. The DSMEG Regulations, r.3:
"(1) This regulation applies where:
(a) excise goods are:-
(i) subject to a duty suspended movement that started in the
United Kingdom; or
(ii) imported into the United Kingdom during a duty suspended
movement; and
(b) in relation to those goods and that movement, there is an
irregularity which occurs or is detected in the United Kingdom.

(2) Where the Commissioners are satisfied that the irregularity
occurred in the United Kingdom, the excise duty point shall be the time of the
occurrence of the irregularity or, where it is not possible to establish when
the irregularity occurred, the time when the irregularity first comes to the
attention of the Commissioners.

(3) Where it is not possible to establish in which member State
the irregularity occurred, the excise duty point shall be the time of the
detection of the irregularity or, where it is not possible to establish when the
irregularity was detected, the time when the irregularity first comes to the
attention of the Commissioners."

2. The DSMEG Regulations, r.4:
"(1) This regulation applies where:
(a) there is a duty suspended movement that started in the
United Kingdom; and
(b) within four months of the date of removal, the duty
suspended movement is not discharged
by the arrival of the excise goods at their destination; and
(c) there is no excise duty point as prescribed by regulation 3
above; and
(d) there has been an irregularity.

(2) Where this regulation applies and subject to paragraph (3)
below, the excise duty point shall be the time when the goods were removed from
the tax warehouse in the United Kingdom.

(3) The excise duty point as prescribed by paragraph (2) above
shall not apply where, within four months of the date of removal, the authorised
warehousekeeper accounts for the excise goods to the satisfaction of the
Commissioners."

3. The DSMEG Regulations, r.7(1):
"Subject to paragraph (2) below, where there is an excise
duty point as prescribed by regulation 3 or 4 above, the person liable to pay
the excise duty on the occurrence of that excise duty point shall be the person
shown as the consignor on the accompanying administrative document or, if
someone other than the consignor is shown in Box 10 of that document as having
arranged for the guarantee, that other person."

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